RE: Why wait for 1.5 yr for the real CF?“- North Sea has amazing decline rates (also dependent on the way the oil's pumped up yes - but still)
- Jacky is estimated to go from 12.500 to 7.000 boe/d in H2 of 2009 - barely being on-line!
- Athena goes from 15.000 Boe/d to around 6000 Boe/d in 2.5 years
- Stella also nearly halves in 2 years”
All that being said that still gets IAE to 30,000 k/d by 2011. That’s all that really matters. Every field has decline rates. BUK’s Durango field is also expected to hold production rates for 1.5-2 years before falling off the edge. All BUK’s assets are in the UK so they fall under the same scrutiny as IAE. So why would I go for that when I can suffer the same decline rates in IAE, but have a much higher overall production profile and higher netbacks/boe due to its very high oil component vs. the UK gas of BUK?
As for Stella it is still being delineated. The current production profile is based on the current reserves (14.5 mmboe gross) of the field. That all comes from a resource mapped over 300 ft of gross pay and 6km square in aerial extent. The Stella structure has potentially over 900 ft of gross pay and 12km square in aerial extent. So when they go hunting for that gas/water contact in early 2009 Stella’s reserves could really explode. It has the potential to easily be a 50+ mmboe gross field.
Athena East (100% WI) is an excellent oil discovery that is only about 8 km from Athena. Again no oil/water contact found in the discovery well (Jurassic sands) and the formation looks to be just as large as Athena (70% WI) in aerial extent. All this and they haven’t drilled into the same formation sands as Athena (U. Leek sands). This is another play with an easy 50+ mmbo potential if it works out.
Then there is the other 30+ pure exploration prospects and leads in their current inventory ontop of the Stella and Athena East appraisal plays. Some of them being:
Triton -150 mmbo target (90% WI)
Zeus - 77 mmbo target (100% WI)
Pallas - 50+ mmbo target (70% WI)
Now they might not be in the same size as CAX’s Chaal or 2 Triassic prospects (El Bibane & Ezzaouia) in terms of boe resource potential, but IAE has far greater %WI in all their exploration and appraisal plays and the value of UK reserves/boe are far greater than that in Tunisia.
Those 3 CAX targets are all gas prospects, with the 2 Triassic prospects being larger than Chaal and both having condensate potential as well. But in Tunisia oil and condensates trade at a discount to Brent crude in the UK, based on similar API quality of 38.5 degrees. Gas, which is the primary play in all 3 of those CAX targets trades at a huge discount to gas in the UK where they currently sell for about US$12/mmcf or US$72 boe. Before last month’s correction in oil prices UK natural gas was just over US$15/mcf or US$90 boe. Tunisia’s gas pricing was around US$5/mcf as of 1 year ago.
IAE’s %WI in their exploration plays are around 3x what CAX has in these 3 targets and the pricing of UK oil to Tunisia gas currently is around 3.5 x (US$110/bo vs. $30/boe with Tunisia gas @ US$5/mcf)
Based on the above, CAX has to find 3x3.5= 10.5X the net boe reserves in a Tunisian gas field just to equal the same value of reserves as IAE finding net oil reserves in the UK. So just b/c CAX’s 3 gas targets are larger/boe in potential doesn’t mean that CAX has greater exploration upside b/c the commodity pricing and taxes in the UK is so much better than in Tunisia and the %WI in those fields are much greater vs. CAX’s assets.
I remember when I used to own CUX, whom CAX bought those assets from, a few years back and management stated that both the Triassic targets each had the gross potential for 1-2 Tcf of gas + 75-150 mmbo of condensates. Using the upper estimates of 2 Tcf and 150 mmbo at a 25% WI that translates into 0.25(334 + 150) = 121 mmboe net to CAX. But the problem is that you are not comparing apples to apples b/c the variables mentioned above (different pricing and % gas of total reserves vs. oil) are not incorporated into this.
If you want an apples to apples comparison the 334 mmboed gross of gas gets taken down by the factor of 10.5 and then by another factor of 4 to make those net bo reserves comparable to what IAE gets for a net barrel of oil in the UK. So 2 Tcf gross = 334/10.5/4 = 7.95 mmbo net compared to IAE reserves.
For the sake of making the math simple use 1 bc from Tunisia = 1 bo from the UK as there is a discount of Tunisian liquids to UK Brent oil, but it is not that great to the point where it would have a large impact to the overall reserve values.
So 150 mmbc gross = 37.5 mmbc net. That means that if CAX was successful in finding an overall Tunisian gas field of 2Tcf +150 mmbc gross that would net CAX a field that would have the same net value as an IAE UK field that held 37.5+7.95 = 43.95 mmbo. And that is using the upper range targets for both Triassic prospects. Using the lower targets of 1 Tcf + 75 mmbc, CAX would net 22.73 mmboe.
So even though the CAX exploration targets look larger on paper, they’re value can be duplicated in the UK in finding much smaller oil and condensate fields.
“I haven't seen REALLY big prospects in the pipe-line that can keep them going for 10+ years”
I don’t care about 10 years from now. I want them to get to 2011 at 30,000+ boed and then I will reassess the company then to see what upside they have at that time. At that time if the upside is better in other companies than you can sell and buy another one. There are hundreds of companies out there. I don’t need to sit on something for a decade, 2-3 years is fine with me. If they give me a reason to hold it past that timeframe then fine.
By 2011 it’s 2 years away and that means 2 years of appraisal drilling that should increase current reserves and exploration drilling that could increase current appraisal targets. They are not going to have the same assets at that time as they do today. No company will after 2 years.